Monday, September 01, 2003

The Whole Cost and Nothing Above the Cost
Expedia, the travel reservation service has now started to let customers know that the full cost of purchasing a ticket or renting a car is. They are not perfect. They don't tell you until you place your order, but it's a step forward.

I don't know about you, but I find it insulting when companies misrepresent their pricing. It may not technically be lying, but it's pretty close. Other examples include:

- Car companies that advertise a lease rate of $399 a month, but concealed in the small print of a TV ad, unreadable in the time available, or in a small font in a print ad, is the note that you have to put four to seven thousand dollars down to get the rate.

- Airlines that list the price of a single portion of a return flight are equally deceptive.

The logic seems to be: if I scream loudly enough, I will get someone to pay attention to me and they will buy anyway even if I understate or don't specify all the costs. But think of the hidden cost to the viewer or reader, the inquiry that leads to no purchase, wasted time and frustration. If business is about establishing a relationship with your customer and delivernig value, a failed inquiry due to a misrepresented price actually subtracts value from the relationship.

As I have argued in this weblog before, if you think of your role in business as being to "act on behalf of your customer", then these misleading ads just don't work, particularly if your objective is to build a relationship with customers.

A entrepeneneur commented to me the other day: "I fly Southwest. I typically have to change my schedule two or three times before it gets finalized. With SouthWest, changes are painless. There are no stupid penalties. They have my loyalty."

Companies that scream low price and hang a lot of hidden prices off the low price are not likely to be engendering loyalty. And if loyalty is as much emotional as cognitive, how can companies expect loyalty when nasty surprises lie at the end of the purchase attempt?

I am sure that tactically, screaming misleading prices may have short term positive impact on revenues, but you are also educating your prospects not to believe you in the future. You have lost their trust. You may win the battle, but lose the war.

In contrast, companies like Ikea, Costco, Expedia and SouthWest (to name just a few of may good companies with a clear strategy and a value orientation) are saying to customers: "We respect you. We are in the business of creating value for you. We want your loyalty and we want your business long term."

In a competitive world, where ratings and rankings can make and break brands, it makes a whole lot of sense to treat your customer with respect.

Alistair Davidson

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